REAL ESTATE GUIDE

FREQUENTLY ASKED QUESTIONS

Are real prices currently over inflated and are the prices going to crash

No, according to a senior economist with the Royal Bank of Canada, were are not seeing another market bubble emerge. The term 'market bubble ' is used when the real estate prices are over inflated like they were in major cities in the late 80's. During that time, buyers were driving prices up by over spending because of speculation. And by 1990 many people were over financed to an affordability level of 505 compared the standard 30% debt service ratio. When the interest rates increased, they were no longer able to afford the payments, and the market bubble burst. Now, the market is being pushed up by buyers who are still within a 32% GDS. Much of the population is middle age with strong household incomes, stable careers and grown children. With interest rates being so low they are moving up into larger homes that create a premium lifestyle and this is pushing up the market of homes in the $200,00 - $250,000 price range. Check out next months article "what new seniors want" answering the question " Is it true that many people are downsizing into smaller bungalows".

Is it true that many people are downsizing into smaller bungalows"

Surprisingly the answer is NO. Statistics Canada predicts that over the next 10 years, the majority of the population will be in the 55 - 65 year age bracket and their housing needs will have a significant impact on the housing market. There is a large group of affluent baby boomers that are looking to move into larger, more expensive homes to enjoy a certain lifestyle. 65% of this age group plan to "cocoon" at home and demand a premium environment that offers maximum comfort and room for hobbies or home businesses. This group is pushing up the $200,000 plus housing market by purchasing many homes in the higher price range, As an example, 2 story homes in Niagara Falls priced between $200 - 250,000 rose 15% in 2003. This dominant market group are inheriting wealth, are not afraid of taking out mortgages (especially with the low interest rates) and are expected to live longer in their own homes. Homes based business, in- law suites, and in home senior care are all increasing popular and the "new senior" is not afraid to spend their money on nice homes to order to enjoy maximum comfort.

Submitted by Barbara Grumme, Century 21 Today Realty Ltd Brokerage.